Beijing’s spy balloon is the latest global public drama to hit the U.S.-China relationship. For a few days, all eyes peered upwards. We wanted to know whether President Joe Biden would get the gumption to take action.
The shoot-down could have been nationally cathartic. U.S. defensive presentations to hundreds of diplomats around the world informed them of the ballooning dangers of the Chinese Communist Party (CCP).
Finally, we had done more to defend ourselves and our partners, it seemed, at least in the short term.
The effect of the balloon caper on China’s soft power can’t have been good, especially in the United States. After the pandemic apparently originated in Wuhan due to the CCP’s culture of silence, better thought of as a criminal omertà, the balloon incident reinforced U.S. negative perceptions of the regime in Beijing.
In America, three strikes and you’re out. The CCP is on its way to umpteen strikes, considering all it has done throughout history. The balloon is the least of it.
So what was Chinese leader Xi Jinping thinking? Did he even know? Did the CCP think our naïveté would last forever?
As U.S.-China relations continue years of deflation, we are gradually, too gradually, making it more difficult for China-based companies to do business in the United States.
On the bright side, former President Donald Trump’s 25 percent tariffs on China were upheld by the Biden administration. That gave a signal to manufacturers in the Middle Kingdom that if they want to continue selling to American customers, they would have to get out of CCP land.
The destinations for companies leaving China have included India, Vietnam, Bangladesh, and Ethiopia. But just one place is uniquely suited to supply U.S. markets. It has not only cheap labor, but a U.S. free trade agreement and geographic proximity to the American Southwest.
That place is Mexico.
Since Biden took office, Chinese companies have realized its advantages and quietly built their manufacturing systems just south of the U.S. border.
And China isn’t the first. Japan and South Korea have also moved some manufacturing to Mexico to label their products “Made in Mexico” and get them trucked north of the border duty-free.
Goodman notes that companies from China nearshoring to the other side of the Rio Grande attest to the “deepening assumption that the breach dividing the United States and China will be an enduring feature of the next phase of globalization.”
The state of Nuevo León in Mexico, for example, has reaped nearly $7 billion in foreign investment since October 2021. That makes the state the second-largest foreign investment destination in Mexico after Mexico City. Forty-seven percent of investment in Nuevo León comes from the United States, but the second-largest origin is China, at 30 percent.
A single China-headquartered company in Mexico can represent thousands of jobs. Man Wah, a Chinese furniture company that reportedly moved to Mexico last year to evade tariffs and shipping costs, is building a $300 million factory in Nuevo León. The company plans to hire 6,000 workers to produce 900,000 pieces of furniture a year. Most of that furniture will likely be sold in the United States.
Let’s not forget that each worker that the U.S. economy loses to China or Mexico would support a family here, fund government services, and strengthen local economies, from grocery stores to home construction. Yes, Americans want cheaper prices, but in times of economic distress, high government debt, and mounting geopolitical risks to democracy from China and Russia, now may not be the best time for the world’s most powerful defender of freedom to give away its markets for free.
The China tariffs are having intended effects, but only partially. They were meant to move jobs from China back to the United States, but many of those jobs are, in fact, moving to Mexico. They were meant to decrease China’s economic power, upon which its military power rests. But profits from China’s move south will flow back to China and, therefore, buttress the CCP’s militarism.
As with China tariffs, the U.S. Congress should help Americans understand whether the lower prices we get from production in Mexico are really worth the loss of jobs to Mexico, and the loss of profits to China, on top of a continued failure to fully reindustrialize the United States.
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